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Brief Principles for a Resilient External Equity Manager Program

The majority of external managers including employed traders and analysts have most of their time spent towards the investment management process or at least they should. Choosing the right selection of investment managers is a challenging task for public investment officers. Some important principles include firms to have a strong alignment of interest.

Principals of the external manager firm should have some skin in the game.

This includes the firm and the employees investing alongside their clients. Employee ownership is a powerful concept that aligns interests in asset management firms. This potent attraction can motivate employees and strengthen personnel retention. This leads to the issue that the majority of asset managers are large with a menu of products or “solutions.” For larger organizations, one possibility to tackle this is to give those employees ownership of the product, a profit-sharing scheme.

Another major point to draw out is robust compliance. Having an operational framework that can lend institutional investors clarity on their risk exposures is priceless. Third, liquidity plays a paramount topic for investors. If one key investor leaves, how will it affect the fund?

Last, when selecting investment managers that plan on capturing alpha, investment officers need to analyze their investment strategy. Is it unique; is this really a beta strategy in disguise? Is this external manager generating excess risk-adjusted returns?

Asian Sovereign Funds Not Slowing Down on Tech Investing

According to data from SWFI’s Sovereign Wealth Fund Transaction Database, Asian sovereign funds invested US$ 6.05 billion directly into companies and assets in the information technology sector from Jan 2017 to November 22, 2017. In a comparable time frame from Jan 2016 to November 22, 2016, this same group of Asian sovereign funds directly invested US$ 5.02 billion in the sector. These are direct investments, not fund commitments or manager allocations.

Asian sovereign funds such as GIC Private Limited, Temasek Holdings and the Korea Investment Corporation (KIC) have demonstrated bullish signals to the technology community over other sectors. GIC and Temasek have also been major investors in the private side of deals, funding a wide range of tech startups, while providing financial firepower in buyout transactions.

Some notable direct tech investments in 2017 by sovereign funds include Meituan-Dianping, SoundCloud, Nets A/S, Visma AS, Turn, Inc. and Vantiv.

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Future Fund Makes a Guardian Out of Former J.P. Morgan ANZ Chair

The Australian government has appointed Robert Priestley – current non-executive chair of J.P Morgan for Australia and New Zealand (ANZ) and a non-executive director of ASX – to serve on the Future Fund Board of Guardians for a five-year term from November 7, 2017. Priestley replaces former Morgan Stanley Australia chief executive Steven J. Harker.

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Associated British Ports Reboots Property Development Arm to Capitalize on Land Bank

Associated British Ports (ABP) – operator of 21 major ports throughout the United Kingdom – has announced a reboot of its ABP Property division, complete with a new team of specialists in commercial development and logistics led by Huw Turner, in order to identify and develop strategically significant locations in its 2,372 acre land bank.

ABP is owned in large part by a consortium of pensions and sovereign funds, including the Canada Pension Plan Investment Board (CPPIB) at 33.88% ownership, OMERS at 30%, Singapore’s GIC Ventures Pte Ltd at 20.00% ownership, and the Kuwait Investment Authority at 10.00% ownership. Large institutional investors such as sovereign funds, pensions, and endowments have slowly increased allocation towards infrastructure over the past six years as an alternative to equities and bonds, according to asset allocation data from SWFI.

Plans

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